The Government should establish a specific venture capital fund for the digital content industry similar to the fund already established for the biotechnology sector this year, according to recommendations in a new report by Forfás.

This fund would address a critical lack of funding to support the development of digital content enterprises, according to the Forfás report entitled A Strategy for the Digital Content Industry in Ireland.

The report highlights a dearth of knowledge of the digital content industry, which contributes to this lack of funding.

One of the key challenges for the sector is that there still remains a lack of awareness among corporate organisations of the benefits of digital content and how it can positively impact their business, the report says.

According to the report, the Government's €250 million Digital Hub project should be developed as a "showcase" for digital content in order to market the capabilities and benefits of digital media/content to firms in the Republic as well as internationally. The Department of Finance and the Revenue Commissioners should also move to amend tax policy to ensure the success of the industry in the Republic.

The report recommends that they progressively reduce the Republic's VAT tax rate in line with that of other European states. The Republic's VAT rate of 21 per cent is above many of its European competitors.

This means Ireland is not as attractive a location for non-EU firms supplying digital content to consumers, the report says.

The report also includes interesting data on the global digital content industry and the current situation in the Republic.

It estimates the global content industry was worth $178 billion (€178 billion) in 2001. This figure is forecast to grow at a rate of 29 per cent per year, reaching $439 billion in 2006.

An audit of the content industry in the Republic undertaken by PricewaterhouseCoopers, and included in the report, shows that 280 firms are involved in digital products and services.

These companies directly employ 4,000 to 4,500 people and are supported by a range of service and support firms.

The industry primarily comprises indigenous companies, with 238 firms. Similar to international trends, the industry has developed in clusters, namely in digital film and television, business publishing and e-learning.

Forfás defines the vision for Ireland as a centre for the digital content industry "to develop a world-class digital content industry based on the targeted development of a number of clusters at the 'intellectual property end' of the market".